The papers of know (SBSP3) are cheap and could grow even more this year in the face of the electoral race for Palácio dos Bandeirantes, seat of the Government of Sao Paulosays the BTG Pactual.
The bank raised its recommendation from neutral to buy, with a target price of BRL 44.
“Even without considering any scenario of privatization in our numbers, we think the name is trading at a cheap real IRR (Internal Rate of Return) of 10% and at 0.74x EV/RAB (firm value over regulatory asset base, in Portuguese)”, he puts.
Furthermore, analysts João Pimentel and Gisele Gushiken say they are becoming more “constructive as we gradually see more pro-privatization candidates gaining traction in the polls”.
Currently, the candidate Tarcísio Freitasfrom the Republicans, who have already promised to privatize the knowis ranked third in the polls. Rodrigo Garciafrom the PSDB and current governor, is also in favor of selling the company.
“That said, we believe that the name offers an attractive risk/return, as a privatized Sabesp – assuming a conservative EV/RAB of 1.3x – can be worth R$95”, they say.
Sabesp results
THE Sabesp had a profit of R$ 975.6 million in the first quarteralmost double the performance of a year earlier on a boost generated by gains from the appreciation of the real against the dollar.
The São Paulo water and sanitation company had operating results measured by profit before fees, taxesadjusted depreciation and amortization (Ebitda) of 1.72 billion reais from January to March, growth of 5.2% in the annual comparison.
The company had net revenue of BRL 4.87 billion in the period, up 4.1% year-on-year, helped by tariff increases and billed volume from public customers (+13.2%) and wholesale (+3 .5%).
Source: Moneytimes
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